RELATED AUDIO & VIDEO

Stripe's chief executive Patrick Collison said the lofty valuation reflected the promise shown by his company, which processed billions of dollars in payments last year for businesses.

The startup's rapid growth has spurred talk in Silicon Valley of an insurgent threat to Bay's PayPal that has not faced serious competition in a decade.

"It's a nice validation of what everyone has gotten done over the last year," Patrick Collison, who dropped out of the Massachusetts Institute of Technology in 2009 to found Stripe, said of the recent investment.

He said he was confident the demand for payment processing would only explode in the coming years because only 2% of all commercial transactions take place online today.

"There should be more transactions happening on the Internet on a macro basis, whether you believe that should be 20% or 40%," he said.

Stripe announced its funding on the day when activist investor Carl Icahn called on eBay to spin-off PayPal, a fast-growing unit that has thrived while eBay has grown at a more modest pace in recent years.

PayPal's co-founder, Peter Thiel, who has backed Stripe since its early days, led Stripe's most recent funding round through his venture capital firm, the Founders Fund.

Stripe's other institutional investors include Sequoia Capital, General Catalyst Partners and Khosla Ventures.